Managing investments: How to decide whether you require a financial planner or not

Dev Ashish

For regular visitors of sites such as Moneycontrol, the concept of financial planning must be fairly familiar. So it would be good to get straight to the point.

-Do I really need a professionally made financial plan?

-Can’t I do it on my own?

-How tough can it be?

These questions often come to people’s minds.

To be honest, managing personal finance isn’t very tough. The basic principles are in fact, really simple.

But let me bring a simple analogy here.

Everyone knows how to be healthy – eat right, exercise, don’t take stress, etc. Still, most people around you cannot exactly be called as really healthy. Isn’t it? The same is the case with personal finances. Most people know what is the right thing to do. But still, they end up doing things that aren’t in their (or their investment’s) best interest.

I think everyone doesn’t need a financial plan.

Sounds odd coming from an investment advisor himself? But that is the truth.

DIY investing or taking advice?

Some people are good with investments and can do a pretty good job on their own. These are the real DIY (do-it-yourself) investors who know what they are doing. But many others aren’t that good. And they could really benefit from working with an investment advisor. Sadly, many of them mistakenly don’t think so. They want to think of themselves as savvy DIY investors but all they end up doing is mess things up. So, it’s very important to find out first whether you can be a DIY investor or not.

Now let me try to list a few simple questions that will help you decide whether you should go for financial planning or not:

-Do you ‘really’ know how much you need to save for goals such as children’s education, house purchase (down payment & loan repayment), etc.? And are you actually saving that much for each of these goals? Or you are just ‘doing your best’ and hoping that things will work out ‘somehow eventually’?

-Are you saving enough for your retirement? Or you still feel that since its decades away, you don’t need to worry about it now?

-Have you kept retirement savings separate from other goals’ savings? Do you know why it is important that you don’t dip into retirement corpus to fund other goals?

-Do you have several traditional insurance plans that take away a lot of premium but somehow you don’t feel right about it whether the maturity amounts from those policies will be sufficient for your goals or retirement?

-Are you confident that you will be able to handle financial emergencies such as a temporary job loss, sudden unplanned expenses and medical emergencies without much trouble?

-You want to handle your investments yourself. It feels good. But somehow or the other, you don’t get time to do it? Or may be your job is so time-consuming that you don’t even get time to spend with your family!

-Or you have the time but keep putting off financial decisions due to analysis paralysis?

-As your investments are increasing, are you getting scared and unsure whether you are managing your investment properly or not?

-Do you feel aggressive when markets are going up but scared (and conservative) when it begins to fall?

-You have random investments and products accumulated over the years. The portfolio you have is totally disorganized and directionless. And you have no clue how all that fits into your life’s personal financial jigsaw puzzle.

-Your major source of buying / selling in or out of investments has been your friend/family/colleagues’ opinion or google searches.

If you are not sure of the answers to the above, then you need to get yourself a financial plan. Or at least start exploring how to get yourself some good and effective investment advice.

Financial advice not just for the rich

By the way, there is a misconception that many have. That financial advisors are only for the rich. That is not true. Investment advice is not only for the rich. Anyone can benefit from it and take control of their finances.

It is said that if hiring an investment advisor gives you peace of mind, then it’s worth it. Hiring a good investment advisor will require you to spend some money. And that is all right. Because the easily available free financial advice may prove very costly in the long run.

Many times, working with advisors people end up realizing that all those years, they were not even asking the right questions and overlooking so many important aspects of their finances. It’s like an advisor can push you to become more honest about your finances and not have false presumptions. So, such exercises help you get back on track.

This is important. Being an investment advisor (SEBI RIA) myself, it’s naturally in my interest to tell you that you need financial planning. (So treat this is a disclaimer from me). But nevertheless, the fact is that if not all, then at least some people really do need external intervention to manage their finances.